A copublication of The World Bank and the - DVCA

12 DOING BUSINESS 2011
About Doing
Business:
measuring
for impact
Governments committed to the economic
health of their country and opportunities
for its citizens focus on more than
macro economic conditions. They also
pay attention to the laws, regulations and
institutional arrangements that shape
daily economic activity.
The global financial crisis has
renewed interest in good rules and regulation.
In times of recession, effective
business regulation and institutions can
support economic adjustment. Easy
entry and exit of firms, and flexibility
in redeploying resources, make it easier
to stop doing things for which demand
has weakened and to start doing new
things. Clarification of property rights
and strengthening of market infrastructure
(such as credit information and
collateral systems) can contribute to confidence
as investors and entrepreneurs
look to rebuild.
Until recently, however, there were
no globally available indicator sets for
monitoring such microeconomic factors
and analyzing their relevance. The first
efforts, in the 1980s, drew on perceptions
data from expert or business surveys.
Such surveys are useful gauges
of economic and policy conditions. But
their reliance on perceptions and their
incomplete coverage of poor countries
constrain their usefulness for analysis.
The Doing Business project, initiated
9 years ago, goes one step further. It
looks at domestic small and medium-size
companies and measures the regulations
applying to them through their life cycle.
Doing Business and the standard cost
model initially developed and applied in
the Netherlands are, for the present, the
only standard tools used across a broad
range of jurisdictions to measure the
impact of government rule-making on
the cost of doing business. 1
The first Doing Business report, published
in 2003, covered 5 indicator sets
and 133 economies. This year’s report
covers 11 indicator sets and 183 economies.
Nine topics are included in the
aggregate ranking on the ease of doing
business. The project has benefited from
feedback from governments, academics,
practitioners and reviewers. 2 The initial
goal remains: to provide an objective
basis for understanding and improving
the regulatory environment for business.
WHAT DOING BUSINESS COVERS
Doing Business provides a quantitative
measure of regulations for starting a
business, dealing with construction permits,
registering property, getting credit,
protecting investors, paying taxes, trading
across borders, enforcing contracts
and closing a business—as they apply to
domestic small and medium-size enterprises.
It also looks at regulations on employing
workers as well as a new measure
on getting electricity.
A fundamental premise of Doing
Business is that economic activity requires
good rules. These include rules that
establish and clarify property rights and
reduce the cost of resolving disputes,
rules that increase the predictability of
economic interactions and rules that
provide contractual partners with core
protections against abuse. The objective:
regulations designed to be efficient in
their implementation, to be accessible
to all who need to use them and to be
simple in their implementation. Accordingly,
some Doing Business indicators
give a higher score for more regulation,
such as stricter disclosure requirements
in related-party transactions. Some give
a higher score for a simplified way of
implementing existing regulation, such
as completing business start-up formalities
in a one-stop shop.
The Doing Business project encompasses
2 types of data. The first come from
readings of laws and regulations. The second
are time and motion indicators that
measure the efficiency and complexity
in achieving a regulatory goal (such as
granting the legal identity of a business).
Within the time and motion indicators,
cost estimates are recorded from official
fee schedules where applicable. 3 Here,
Doing Business builds on Hernando de
Soto’s pioneering work in applying the
time and motion approach first used by
Frederick Taylor to revolutionize the production
of the Model T Ford. De Soto
used the approach in the 1980s to show
the obstacles to setting up a garment factory
on the outskirts of Lima. 4